Kickstarter Finally Trusts Wisdom of the Crowd

Kickstarter, the service whose name has become synonymous with crowdfunding, has simplified its rules and will cut down on vetting projects. This controversial move is designed to reinforce a truth the current money-oriented startup community keeps forgetting: If an idea is crazy and unfeasible, that doesn't mean it shouldn't be funded.

In the past, a "creator" – artist, developer, inventor, startup chief executive – had to submit the project for approval by to Kickstarter's "community managers." The vetting procedure caused delays and drove some projects to Kickstarter's competitors, mainly Indiegogo.com, which has more relaxed rules. Kickstarter now allows creators to begin their funding campaign in minutes, after their presentation is checked by an algorithm, much like on Indiegogo.

Kickstarter gave the world the Oculus Rift, a 3-D visual-reality headset whose producer was recently acquired by Facebook Inc., the Pebble smartwatch and the "Veronica Mars" movie. Its success has been such that Thecrowdfundingcentre.com estimates that the volume of global crowdfunding doubles every 60 days.These same successes, however, have skewed the public's perception of what this type of funding is really about: promoting naked creativity.

In 2012, Kickstarter's co-founders wrote a post entitled "Kickstarter Is Not a Store." With the creators of hardware products offering to ship them to backers, as Pebble did, it is tempting to see the platform as a kind of preorder shopping mall. Many people do: as Adrianne Jeffries wrote on The Verge last year, "Kickstarter is not a store, except when it is."

In recent months, the "retail" perception has been reinforced by a crusade against crowdfunding "scampaigns" by James Robinson, a journalist with Pando Daily, an influential publication for the startup community. He went after a Russian startup called Healbe, which claims to have invented a device capable of automatically measuring the wearer's calorie intake. Experts cited by Robsinson doubted the science behind the invention, and he wrote at least a dozen articles that suggested Healbe's campaign was a scam. Healbe raised almost $1.1 million on Indiegogo and shows no sign of disappearing with the money, but it has recently delayed the product launch.

Robinson assailed Indiegogo's permissiveness: Healbe, he wrote, "weren't the first hardware scam to exploit Indiegogo's apparently useless fraud prevention 'algorithms', and nor will they be the last."

Kickstarter's rule changes are an asymmetrical response to such attitudes. Crowdfunding platforms are not stores, the possibility of failure is built into all creative projects, and terms such as "scam" and "fraud" may not apply to this funding model. When the crowd is presented with an unworkable idea, its reaction is sometimes more valuable than the product itself. Judging by how much money Healbe's automatic calorie monitor collected on Indiegogo -- despite all the disbelief in the tech blogosphere -- it would appear to be amuch-needed product that big companies should invest in.

Last fall, Toronto-based TellSpec raised almost $390,000 on Indiegogo for the production of a tiny scanner able to produce nutritional information about any food. Robinson wrote about it as a scam. Now, an Israeli-invented device called SCiO, another tiny scanner that can determine the composition of physical objects, including food and medicines, is taking Kickstarter by storm, having already exceeded its $200,000 funding goal by a factor of 11. Clearly, people want a gadget like this, and if teams keep getting funding to work on it, someone eventually will get it right.

Crowdfunding platforms essentially allow people to vote for ideas, not purchase specific products that must be delivered on deadline. For example, if a device that doubles the speed of smartphone charging beats its funding expectations by a factor of 35, that's a vote of confidence in the usefulness of a gizmo that performs the same function, not this particular implementation.

Most people who fund projects on Kickstarter and Indiegogo are prepared to deal with would-be inventors who overstate their achievements. Companies with real-life products do it all the time, too. The relaxation of vetting rules is a welcome development because the crowd is ultimately a smart investor: it will sort the good ideas from the bad ones and get what it wants in the end, though perhaps not on the first attempt.

To contact the writer of this article: Leonid Bershidsky at lbershidsky@bloomberg.net.

To contact the editor responsible for this article: Mark Whitehouse at mwhitehouse1@bloomberg.net.

Leonid Bershidsky is a Bloomberg View contributor. He is a Berlin-based writer, author of three novels and two nonfiction books.
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